VAT rates in Georgia decreased from 20% to 18% back in 2005. Domestic and foreign businessmen called it one of the main advantages of the new Tax Code. In addition to this, in 2012 the Ministry of Finance limited the period of return of value-added tax to five days. This event had a positive impact on small and medium businesses and made taxation in Georgia even more loyal.
This is why many tourists not only buy expensive goods in the country but also open a business and start their own production. Let us find out how VAT is calculated in Georgia and what an ordinary tourist or entrepreneur needs to do to get a VAT refund.
What is VAT
VAT or value-added tax is imposed on any product or service that is sold by the firm at a price even slightly above its cost. VAT is calculated on the basis of the difference between the cost price of a product and its sale price. Tax on goods or services in the form of a price premium, which goes to the state budget. The producer of the goods pays to the state the difference between the full VAT and the part contributed by the end consumer.
For the buyer of a product or service, VAT is similar to sales tax because it is also added to the value of the product. This approach allows for achieving several goals at once:
- To minimize the risk of tax evasion;
- To exempt exported goods from national taxes;
- To distribute taxation between buyer and producer without paying tax on the same value.
VAT in Georgia
After the formation of modern VAT taxation in Georgia has not undergone much change. The tax rate has been and remains at 18% for over 13 years. In Georgia, taxes continue to be reformed today, and the total tax burden does not exceed 16.4% - one of the best indicators in Europe and Asia.
In order to understand how VAT is calculated in Georgia, it is necessary to study the current code in more detail. It is especially important to know which goods and services are not subject to VAT. You will not have to fill out a VAT declaration in Georgia if you buy the following goods:
- printing and printed products;
- pharmaceutical as well as veterinary products;
- transfer of goods in the Free Industrial Zone;
- sale of a plot of land;
- electricity production and natural gas imports;
- fuel sold in tare;
- passenger cars, excluding companies engaged in buying, selling and renting cars;
- securities;
- real estate and movable property that is in state ownership;
- and others.
The following items may also be included in the category of goods and services that are not subject to taxation:
- Transit goods for export and re-export, as well as direct services for these goods, such as navigation services, expedition services, cargo documentation services, inspection services, etc.
- providing services for the carriage of passengers and luggage, if the point of departure or destination is outside Georgia, and a single transport document has been drawn up and signed for carriage;
- sale of goods in the free trade zone;
- tourist organizations and anything related to tourism are completely exempt from VAT;
- and others.
If you or your organization on the territory of Georgia was incorrectly calculated VAT, or the tax is charged for the non-taxable goods added to the value, you can return the funds. For this purpose, the entrepreneur must submit a corresponding declaration to the tax authorities of the country.
Information about declaring and refunding VAT
Companies that have registered with the Income Service as VAT payers have the obligation to declare VAT (a company may register voluntarily or if its turnover exceeds GEL 100,000 during 12 calendar months). The declaration should be submitted by the 15th day of each month following the reporting month. When selling goods and services, the company has an obligation to pay VAT, while purchasing goods and services, the company will count the VAT paid. The difference between these two indicators may be either positive or negative.
When the difference is positive, the company must pay VAT;
When the difference is negative (if the VAT credit is higher), the difference is accumulated in a single tax account and the funds can be used for other taxes or, by submitting an application to the revenue service, the VAT can be returned to the company's bank account.
It is difficult enough to find out for yourself about the tax system of another country, and to get the VAT refund you will have to go into the question for a long time. It is better to contact us and we will easily help you make a competent calculation, fill in a declaration, or return the value-added tax in the shortest possible time.